Spring is in the air, and for many that means it’s time to start thinking about buying or selling a home. Home buying season will soon be in full swing, and you need to be ready, whether you hope to sell your home or whether you hope to buy (maybe you plan to do both). Here’s what to do to get ready for this year’s home buying season:
If you’re selling
Selling a home in today’s market can still be tough. While home prices have been recovering in some markets, price growth is expected to slow in 2015. This means more leverage for buyers, especially if you live in an area that hasn’t yet recovered from the recent crash. As a seller going into home buying season, you need to take steps to make your home more attractive.
“The easiest thing you can do is deep clean prior to listing your home for sale,” says Jackie Beck, the personal finance author behind The Debt Myth. She also recommends removing most of the furniture to open the home and inspire the feeling that it has a great deal of space available.
Lauren Greutman, the frugality expert behind I Am That Lady agrees. She points out that it’s the small cosmetic touches that make a home attractive to buyers and shares an inexpensive trick: “We bought brand new towels and linens and kept them folded in a chest,” she says. “Whenever we had a showing, we would take them out and put them in bathrooms and bedrooms.”
“Temporarily put away any photos of your family and other people,” says Karen Cordaway, the financial writer behind Money Saving Enthusiast. Her real estate agent gave her the advice to stage the home and put away anything that seems too personal. “This way potential buyers can envision themselves in the home.”
As a seller, if you’re getting ready for home buying season, you need to spruce up your home and make sure it doesn’t look like your home anymore. It might not be worth it to engage in major remodeling, but cosmetic touches to the inside and outside of the home can boost curb appeal and make a first impression that increases the chances that you’ll sell your home faster, and for a price closer to what you’re asking.
If you’re buying
When buying a home, you need to know your stuff. A home purchase is likely the largest you’ll make, and you’ll have to do it by borrowing money. This means you need your financial ducks in a row before the home buying season kicks in — and you need to do your research.
“Have a clear idea of what is important to you regarding location,” says financial writer Elisabeth Ritter Kelly, from A Matter of Life or Debt. “Everything else can be managed with expectations, but that location piece is so important.”
Understanding what you want is important in areas beyond location, though. Teresa Mears, who writes at Living On The Cheap, points out that you should know what’s most important to you when it comes to choosing a home, and what you should compromise on. “Know where you can compromise,” she says, “because you’ll have to compromise.”
You don’t want to give up anything important, though, so it’s important to be clear on what matters. Emily Guy Birken, financial expert and author of The Five Years Before You Retire, suggests that you be ready to walk away from any home if the terms aren’t right. “It gives you much more negotiating power and allows you to act more rationally throughout the buying process,” she says.
Nicole Rosen, the writer behind Finance Diva, who has experience as a loan originator, points out that you need to watch the market. You should understand the area where you want to buy, and have an idea of what homes are selling for — and how long it takes them to sell. “A real estate agent can help you with the process,” she says, “but an educated buyer will make better choices.”
Once you know what you want from a home, and you have a good idea of what you can afford, it’s time to make sure that your finances are ready for home buying season. Nearly every financial expert and loan expert points out that you should obtain a pre-approval before you start house hunting. This way, you — and everyone involved — knows how much you have at your disposal.
Know your credit situation before you talk to a lender. Quizzle.com provides you with your free credit report and score and you can also check each of your major credit reports for free once a year at AnnualCreditReport.com. Additionally, sites like Quizzle provide you with an overview of your finances — and an idea of what you might be able to afford. You won’t get far in home buying season with poor credit, so know where you stand, and, if necessary, take steps to clean up your credit so you get a better deal.
If you want to improve your credit score before talking to a lender, you should give yourself 30 to 90 days of lead time, depending on your situation. “An easy trick to boost your credit score is to pay off as many balances as possible before the credit card statement closes,” says Lee Huff, the financial expert behind the website Bald Thoughts. This lowers your credit utilization and can improve your debt to income ratio. You’ll have a better chance of qualifying for the best interest rate, and for getting approved for a higher amount.
However, just because a lender says you can borrow a certain amount, it doesn’t mean that you should. “Don’t overbuy,” cautions Kevin Mercadante of Out Of Your Rut. “If you do, you’ll be paying for it for years, and the house might turn into a trap. Leave enough room in your budget to pay for the non-housing side of your life.”
As you’re toting up costs, make sure you think beyond the mortgage principal and interest. “Ask about taxes, typical utility costs, HOA fees, and any maintenance fees when shopping,” says Kelly Gehrmann Whalen, the financial expert at Centsible Life. “We came across several houses in our hunt that were within our budget, but when factored in the taxes and HOA fees, they were too far out of our comfort zone.”
Do you have the cash?
Finally, whether you are buying or selling, make sure you have the cash on hand to make it happen. When I sold my home it seemed the cash I needed to close the deal kept rising. In the end, I had to come up with about $11,000 to close the deal. Think ahead and save up extra money to get you through the closing.
Paul Pant, the award-winning financial writer at Afford Anything, has been building her real estate holdings over time. “Keep more cash on hand than you think you’ll need, even it that means deferring other investments or major purchases,” she says. Even if the lender says you’ll need a certain amount at closing, you never know when you might need more. A buffer to deal with surprise closing costs is a must.
Casey Fleming has years of experience in the mortgage industry and is the writer behind Loan Guide. He suggests consolidating as much money as possible in one account before proceeding. “It’s a nightmare to trace a bunch of transfers at the last minute before closing, and this is an area that lenders are rabid about today.” Make sure your deposits are traceable as well. Lenders want to know where you’re getting your money.
As you gear up for home buying season, make sure that you are truly prepared for this big step, no matter what side of the transaction you’re on.